Skip to main content

Republicans don't know money. It might be home schooling or it might be willful ignorance, but whatever the reason, you need to protect yourself, because those who know money will prevail.

So, here I present to you some very simple, mathematical facts about Social Security to help you keep your money away from The Bandits. Simple math, nothing more serious than multiplication. Simple multiplication.

 photo DKSSDlogo-1.png

 photo DKSSDlogo-1.png

The Bandits Do Know Money

I don't want you to think I mean no individual Republican knows money when I make the sweeping statement "Republicans don't know money." Some certainly do. Many Republican constituents know money and built considerable financial empires on that knowledge.

Here’s what I mean: The core of the Republican Party—the leaders, the pundits, the thinktankers, and the blind followers—don't know money or pretend they don't. We can tell because they talk incessantly about privatizing Social Security. They say we should turn it into some kind of voucher system or convert it to private accounts. No one who knows anything about money would even consider this because it is such an incredibly bad deal for the public. You don't need to take my word. Math says so.

First of all, Social Security is intended to keep retired people out of poverty. (It has other purposes, such as disability income, but I'm going to concentrate just on the old age benefits.) It is not intended to raise money or make someone wealthy. It is targeted at those who work for a paycheck. If you are well above the poverty line during your working years, you have the opportunity (and should take it) to put aside additional funds for retirement so you can live comfortably and protect your health.

So, the most important thing the system needs to do is pay you. It must pay you when you retire and it must keep paying you for as long as you live. You cannot afford to get to, say, 75 and have someone tell you, "Sorry, but your funds dried up. You're on your own." No. At that point, you don't have the option to go back to 35 and invest more wisely. You need a regular check regardless how long you live.

If you were to have your own account you would have to put aside money for 76. And, for 106, for that matter, because some people live that long. But this means stashing money you will never use. No matter how long you plan your retirement, you could live longer, so you must put aside money for every conceivable year. If the average life expectancy for your age group were, say, 75, you would still need to put away money for many, many years more than that. Let's say you put aside money to live to be 100. That means, on average, you've just wasted 25 years of funding.

Even if you stretched it to 85, you would have wasted 15 years of payments.

But the Social Security system doesn't have to put aside money for these extra years. That's because it pays out to about 55 million people each year. Chances are good any one individual will beat the odds. Individuals must take that into account. But the probability all 55 million will is vanishingly small, and the Social Security system doesn’t have to consider that risk.

And since Social Security is a pay-as-you-go system, if the actual life expectancy goes up or down by a few days, the system can handle the difference easily because that change is a very small fraction of the total.

To get around this problem, proponents of private accounts assume you'll cash out your money and put it into a life annuity. This annuity is a kind of insurance policy that pays you until you die and averages the probabilities over the whole insured group. But, since the group is private, it is inevitably smaller than the Social Security pool. So, it will never be able to zero out the probabilities that the whole group will live substantially longer than average. And it can't raise taxes even one cent to cover the risk that the group, as a whole, lives longer than expected.

To make up for this, and because it is run by a private company (which needs to make a profit), people who put their money into an annuity don't get back (on average) what they put in. For example, if you had $100,000 to put into your annuity, you might get $90,000 worth of coverage, the rest going to pay for profits, administration, and the risk that your group would beat the odds and live a bit longer. In general, life annuities are not protected against inflation, either.

Social Security does not make a profit and has very low risk, because its group is everyone over retirement age, not some fraction. Also, its administrative costs are very low. The part that goes to pay for old age benefits is about 0.6%. The total administrative cost of the Social Security program (including disability) is currently only about 0.9%.

And The Bandits Want Your Money

So, if privatizing Social Security is such a bad monetary idea, why do Republicans keep pushing it?

There are two reasons:

(1) Republicans don't know money.
(2) But the ones that do know money want yours.

I'm convinced many of the elected and hopeful politicians in the Republican Party simply don't know money. They get their talking points from someone else and don't know whether they’re valid. Or, they know the truth and are evil. But either way, they are working for someone else. They're working for The Bandits.

The Bandits are the ones who profit from bad public policy. In the case of retirement, that would be (one must presume) financial services companies, which would profit immensely from privatization. About $650 billion a year runs through the Social Security system (to retirees, survivors and dependents). And not a single person is making any profit from it. If you're greedy, you can't but think, "What a waste...".

The ellipsis here is the part where they are thinking, "If I could get just 1% of that, I'd be making over $6 billion a year." This is the collective thought-balloon over Wall Street. "If we could just get 1% of that...".

Most of it would be profits. That's because Wall Street already has a large platoon of mutual funds they could feed those billions. Actual billions, because in some countries where they've privatized Social Security the administrative costs average 3%, not 0.6% (like the Social Security Administration) or even 1%. Do the math. How much is 3% of $650 billion a year?

And that's not counting loads. Loads are the sales commissions you pay to have them take your money. A typical load is 5%. That means they want to scoop up 5% of your retirement before even handling your money. What's 5% of $650 billion a year?

The costs to the company are trivial. The funds are already in operation. Most of this is pure profit for Wall Street and gravy for their employees. Naturally, the money wouldn't appear magically. It would come from the public. So, who is going to retire on this income? Not you.

This is why the industry has invested substantially in politicians. The right politician in the right place, and whoops! Just open your pockets!

How Do We Get Our Money Back?

Republicans constantly talk about Social Security "going bankrupt". In some number of years, varying depending on factors beyond our control, the surplus built up by the baby boomers will be gone and, in theory, the system will only pay out a very large fraction of its obligations, not all of them. This theory is based on the assumption that the public does not have the willpower to raise the funds needed to pay its obligations. But that's not the math part.

The math part is about how our system is systematically shortchanging Social Security funding. To understand this you need to know Social Security is intended to be funded from payroll taxes.

Why should we fund Social Security by a flat tax, one that is levied on wages, and is theoretically regressive (hitting the poorest the most)? The reason is because payroll taxes make the cost of Social Security proportional to the labor used. Social Security is a form of minimum wage. It requires employers, in the aggregate, to pay the total costs of the labor they use, not just the cost of having it while their workers are actually working, but also when they can't work.

Until we developed Social Security employers could externalize a part of the cost of this labor to society—to families, friends, charity or the government. They only needed to pay employees enough to live while they worked. As soon as the worker developed a debilitating disease or got too old to work, the employer could simply stop paying them. Since most work is done for the cheapest price the company can get away with (workers cannot afford to turn down work, so there are always workers willing to take any job, even if it doesn't pay enough to live beyond work) this means the company could get labor below the actual lifetime living wage for that worker.

Funding Social Security with a payroll tax makes all employers pay at least enough for the worker to survive disability (should it occur) and retirement (when, we hope, it does).

But this funding source means Social Security’s health is a reflection of the health of the workforce. That is, it's a reflection of the economic health of the workforce, and that health ain't so good. Since 1990, workers have seen a substantial loss of income. In just one measure, the percentage of business income going to workers declined from 63% to 58%. What happened to that other 5%? It went to profits.

The U.S. economy is around $15 trillion a year. You can think of that as a proxy for "business income". (Some of it is public income, not private income, but wages for public workers are substantially dictated by wages in the private economy. Workers can move back and forth, albeit slowly, so an increase in private wages would pull workers out of the public system, and vice versa.) So, 5% of the GDP is about $750 billion. This is about how much less workers are being paid compared with 1990.

And, Social Security gets about 10% of wages. There are exceptions (because of the cap) and the actual amount is 10.6%, but 10% is a good enough number to see that the loss of $750 billion in income represents a loss of about $75 billion a year from Social Security. This is roughly how much the decline of 5% represents.

What would it take for Social Security to pay out 100% of benefits for the next hundred years? Well, restoring that 5% deficiency in wages would go a long way.

And unemployment is also almost 1% higher now than it was before 1980. One percent of the work force means about 1 million people not working. Even at minimum wage that represents about 2 billion hours of work and about $14 billion of lost wages—$1.4 billion that’s not funding Social Security. “A billion here, a billion there…”.

The way to strengthen Social Security is to raise wages and increase the employment rate. Wages have stagnated. Employment levels are systematically down. The fight to preserve Social Security is just the warning bell going off. It’s really the fight to save the worker.

When someone (let's say, one of the Republicans that doesn't know money) starts blabbering on to you about how we need to "fix" Social Security, say this:

In order to fix Social Security we need to raise wages. How do you think we should do that? Do you think we should raise the minimum wage? Or, do you think we should make it easier to unionize (EFCA)? Are you in favor of higher tariffs? Or, would you like to see an international minimum wage?
Be prepared to teach them a little math.

Resources

You can find information on the administrative costs of Social Security on this page of the Social Security Administration website. The average administrative cost for OASI (Old-Age and Survivors Insurance) is 0.59% and the total average cost for all Social Security administration is 0.91% for the twenty-first century (2000-2012).

According to the Social Security Administration Press Office Basic Facts page, OASI payments in December 2012 were about $54.7 billion. This is about $650 billion on an annual basis.

How much are administrative costs? I give you Chile. According to the abstract for Privatization of Social Security: Lessons from Chile, the average administrative charge there is 2.94% of average taxable earnings. In the 2012 Republican presidential debates, Newt Gingrich specifically called out Chile’s Social Security system as an example of where he wants the U.S. system to go.

The statistics on wage loss are probably much worse. Wage loss is probably much worse than the statistics I reported. Peter Orszag reported that wages had dropped by 5% from 1990 in his report for Bloomberg in 2011. Karl Smith said on Up w/ Chris Hayes on 29 December 2012 that the labor share of business income dropped 10% between 1980 and today. (This is quoted as a drop from 60% to 30% in the transcript, but that would be inconsistent with other figures.) My inflation adjusted figures for non-supervisory wages from the Bureau of Labor Statistics between 1978 and 2010 show a drop of about 7.4%. Overall wages were a bit higher because they include hedge fund managers and CEOs, but wages for the bulk of workers are down.

I said there would be numbers. I said there would be math. Okay, now, you know money!

Originally posted to Social Security Defenders on Fri Mar 29, 2013 at 02:00 PM PDT.

Also republished by Keynesian Kossacks, ClassWarfare Newsletter: WallStreet VS Working Class Global Occupy movement, and Community Spotlight.

Poll

What should be done to strengthen Social Security?

23%22 votes
28%26 votes
13%12 votes
20%19 votes
14%13 votes

| 92 votes | Vote | Results

EMAIL TO A FRIEND X
Your Email has been sent.
You must add at least one tag to this diary before publishing it.

Add keywords that describe this diary. Separate multiple keywords with commas.
Tagging tips - Search For Tags - Browse For Tags

?

More Tagging tips:

A tag is a way to search for this diary. If someone is searching for "Barack Obama," is this a diary they'd be trying to find?

Use a person's full name, without any title. Senator Obama may become President Obama, and Michelle Obama might run for office.

If your diary covers an election or elected official, use election tags, which are generally the state abbreviation followed by the office. CA-01 is the first district House seat. CA-Sen covers both senate races. NY-GOV covers the New York governor's race.

Tags do not compound: that is, "education reform" is a completely different tag from "education". A tag like "reform" alone is probably not meaningful.

Consider if one or more of these tags fits your diary: Civil Rights, Community, Congress, Culture, Economy, Education, Elections, Energy, Environment, Health Care, International, Labor, Law, Media, Meta, National Security, Science, Transportation, or White House. If your diary is specific to a state, consider adding the state (California, Texas, etc). Keep in mind, though, that there are many wonderful and important diaries that don't fit in any of these tags. Don't worry if yours doesn't.

You can add a private note to this diary when hotlisting it:
Are you sure you want to remove this diary from your hotlist?
Are you sure you want to remove your recommendation? You can only recommend a diary once, so you will not be able to re-recommend it afterwards.
Rescue this diary, and add a note:
Are you sure you want to remove this diary from Rescue?
Choose where to republish this diary. The diary will be added to the queue for that group. Publish it from the queue to make it appear.

You must be a member of a group to use this feature.

Add a quick update to your diary without changing the diary itself:
Are you sure you want to remove this diary?
(The diary will be removed from the site and returned to your drafts for further editing.)
(The diary will be removed.)
Are you sure you want to save these changes to the published diary?

Comment Preferences

  •  Checking In on Your Comments (43+ / 0-)

    I'll be working as this diary goes to press, but I will be checking in on comments from time to time, and I'll get back to anyone with questions.

    Take the poll!

    And, thanks, Roger and friends for holding the blogathon! I've really enjoyed it!

    •  Speaking of "Bandits," maybe you have run across (3+ / 0-)

      this masterful exposition on one of the human traits that's killing us: Stupidity.

      http://cantrip.org/...

      Note that the heirs of the author, Carlo M. Cipolla, were so Stupid, as Bandits, that they tried to keep this out of free circulation, wanting to rent their ancestor's wisdom via royalties...

      "Is that all there is?" Peggy Lee.

      by jm214 on Sat Mar 30, 2013 at 08:27:24 AM PDT

      [ Parent ]

      •  May They Leave Us in Peace (2+ / 0-)
        Recommended by:
        jm214, radical simplicity

        That's a fascinating exposition. It reminds me I wanted to say that I hope all these people who want to privatize Social Security will leave the Democratic and Republican Parties and start their own party. They should just, to be clear to everyone, call it the Stupid Party.

        And they should have T-shirts made that say:

        I'm not just with Stupid, I am Stupid!
        •  ..of course they are not stupid enough to do that- (1+ / 0-)
          Recommended by:
          Liberal Thinking

          the "system" the way it is gives them access to levers of power that are attached to a failing but still potent Legitimacy Machine. One that the rest of us are still tied to, because we apparently have not been beaten and robbed enough to reach that point that the crowd finally got to in the French Revolution and similar reactions to grotesque over-reaching by the have-it-alls...

          So they will work on our gullibility and fear, including that fear of Disorder that keeps us so nicely in line. That, and the given that most of us are all just about living and leaving others alone, working our jobs and caring for our families and little groups. While the Kochs live and plot and act on different, private-jet plane...

          Off topic, but isn't it interesting how Mayor Bloomberg is taking on the mantle of an older form of aristocracy? One hopes the little bits of noblesse oblige he is showing expand into a few other corners of his soul -- something more than large New Yorkers and super-sized sodas. Maybe something on the Singapore model? With caning and the death penalty for disobedience?

          "Is that all there is?" Peggy Lee.

          by jm214 on Sat Mar 30, 2013 at 12:22:55 PM PDT

          [ Parent ]

  •  Republicans don't know money? (6+ / 0-)

    The only reason there IS a Republican Party is because of money.  The Republicans, to use your terminology, are being paid by the Bandits, as are the Democrats at this point.  

    "Always in motion is the future." -Yoda

    by Cassiodorus on Fri Mar 29, 2013 at 02:26:46 PM PDT

  •  Gotta Run (2+ / 0-)
    Recommended by:
    tardis10, Arlys

    But keep 'em coming! I'll be back after work.

  •  I heart math. (2+ / 0-)
    Recommended by:
    Liberal Thinking, The grouch

    Thanks for the numbers.  Nice work.

  •  My plan: (8+ / 0-)

     photo create20millionjobsFICA.png

    ...... Social Security blogathon March 25th thru March 29th. #HandsOffmySS FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

    by Roger Fox on Fri Mar 29, 2013 at 06:15:17 PM PDT

    •  I Like Your Plan (5+ / 0-)

      But I'd also like to get average wages up a few pennies. They've been down, but worker productivity is up. All that money has been going to profits. Maybe a little could be siphoned off to keep the country working.

      Thanks for your comment!

      •  That's the absolute crux of all the SS problems! (7+ / 0-)

        All productivity has been stolen over the past thirty years.  Corporate kleptomaniacs have kept all productivity gains. They now make as much as five hundred times as much as their workers.  If wages had only kept up a little w/productivity SS would be in fine shape.

        My plan:

        Remove the cap on SS contributions from the wealthy while capping their benefits.
        This would be a direct return of our stolen productivity.
        Call it RSP - Return of Stolen Productivity.

        Some here can't deal w/capping benefits for the wealthy because they consider that to be  an opening for the wealthy to call SS a welfare program.  At that point it becomes a war of definitions. Return of Stolen Productivity or a welfare program.

        Corporate masters need some constraints w/o the workers feeling as though we will get them angry at us.

        "I freed a thousand slaves, I could have freed a thousand more if only they knew they were slaves" Harriet Tubman

        by BrianParker14 on Fri Mar 29, 2013 at 09:58:07 PM PDT

        [ Parent ]

        •  I See (0+ / 0-)

          I know, but I'm not in favor of lifting the cap or capping their benefits. For one thing, they outnumber us in Congress. So, changing this is not all that easy.

          Instead, I want to see the employer contribution changed from 5.3 to 10%. That would return the extra money they've been stealing from productivity gains.

          But fundamentally, we need to repaint this as a question of how to get wages and employment levels up. If we succeed there we don't have to change a thing about Social Security because that would vastly increase revenue.

          Except maybe we could lower the rates because they wouldn't need to be so high.

          •  Let's think liberally... (1+ / 0-)
            Recommended by:
            Liberal Thinking

            Most truly small businesses (not the ilk of the Koch's four hundred small businesses), like pizza places or real small business would be harmed by raising  the contribution level and the phoney small businesses like the Kochsuckers' wouldn't stand for it by requiring the legislators and media they own to just ignore any attempt.  The major corps in America, the one's that have a trillion and a half dollars in cash on hand and pay most of their employees shit, (AT&T tried to buy T-Mobile for $34 billion in cash w/no loans, just all cash, yet they pay most of their employees crap wages and their infrastructure is mostly already paid for and I know from working there they make obscene profits),  would not let the legislators they own  make such a change.

            Out numbering us in Congress, heck yeah, they own Congress.  So what do we have to lose or gain by screaming at legislators, because they don't listen anyway.

            Changing employer contributions to 10% is no different than lifting the cap or capping their benefit, it's a meaningless exercise in futility.

            And the same for getting wages and employment up.  W/corps making obscene profits while reducing employment and wages we're whistling in a wind storm.

            They will not increase employment or wages 'cause they're doing just fine as it is. The billionaires realize they can manufacture in the cheapest countries (heck they bought laws that pay them, w/our tax dollars,  to move manufacturing to the countries w/the worst or no labor protections, see where Myanmar is now on their list to make friends w/, ) and they have no interest in improving customer service cause they never use it.

            We're screwed and your suggestions as well as mine are only delusions.

            Do you really think they would increase the percentage employers must contribute or increase employment when they're making record profits w/o additional ee's or increase wages when we're all desperate for work at virtually any wage (just be glad they haven't gotten on the eliminate the minimum wage horse yet).

            And for SS, increasing employment and wages would take years if not decades and what about those who are getting screwed now. Raise the cap, cap the payout to the wealthy now (of course that's as unlikely as any other suggestion that would take a nickel from the wealthy).  We have to realize there are few if any rational, realistic solutions that don't involve dramatic efforts.  

            Think radically.  Liberally has gotten us into this untenable predicament and we're swirling down the drain faster and faster.

            Thinking liberally is so 1960's.  Reason, facts and reality have no impact.

            That's despondency speaking. See my sigline.
            Sorry for the outburst LT

            "I freed a thousand slaves, I could have freed a thousand more if only they knew they were slaves" Harriet Tubman

            by BrianParker14 on Sat Mar 30, 2013 at 07:42:31 PM PDT

            [ Parent ]

            •  I Understand Your Despondency (0+ / 0-)

              But we have the opportunity to stop them. This is about ideas. They are dependent on ideas, but ideas spread on their own. They are trying to convince people that Social Security benefits have to be cut and we have to ultimately replace the whole system.

              It's a bad idea. But, put the right ideas out and they take on a life of their own. All members of Congress they own still have to be elected. What the public thinks matters.

              So, we need to put the right ideas out. It doesn't matter if you call them liberal, radical or anything else.

              The first matter is to stop stupid changes from being made. Undoing damage is more difficult than preventing it. The important thing here is to turn the conversation to wages and employment. That makes it difficult to justify cutting benefits. So, that's my focus.

              •  Thank you LT for replying. Yeah, (1+ / 0-)
                Recommended by:
                Liberal Thinking

                and w/chuckie and davie koch buying the LA Times, the Chicago Tribune and the Maryland paper and the TV swamping us w/the likes of Rendell, Simpson, Bowles, Durbin, NPR, CSPAN (npr and cspan are in the tank) and all their other outlets, I'm sure our ideas will get out there (sorry for the sarcasm).  Money talks and they have virtually all media outlets sown up.  We have this website, Rachel Maddow, Ed Schultz, Chris Hayes, and ???? We don't even have Pelosi and Reid to be counted on for anything and our President is on their side and he isn't running for anything except his daughters inheritance.

                Short of something super dramatic, we don't have a prayer.
                Perhaps tens of thousands stalking every Dem in the Senate and House, no matter where they go, continuously for months w/o a break might convince them but I don't see talking to ourselves having much of an impact.

                We don't even have a consensus here about raising the cap. That's bizarre.

                Oh, and we have the ideas. Ideas aren't the problem. The problem is teh stupids have been taught to hate everything but what they should. They don't realize it's about class and not sex, age, color, geography etc. So much money has been spent schooling them on hating each other we couldn't possibly overcome their stupidity.
                They could be starving and still hate the poor guy next to them and salute the billionaire flying overhead.

                For me, it's about productivity that has been stolen for the past thirty years and raising the cap and capping the wealthy's take is simply just a return of stolen productivity.

                People here complain we shouldn't upset the wealthy cause they'll take everything away from us. Amazing.

                Ideas no longer take on a life of their own. Murder twenty angels in an idyllic upper middle class safe classroom and we can't even get our Senate leader to introduce a bill.  Ninety-one percent have the same idea, background checks, and we can't get that to the floor of the Senate. How are we gonna stop Obama from giving away SS to the people who will fund his daughters inheritance. I'm sure he's calculated what it will take to securely fund his heirs out to several generations (considering several iterations of grandchildren and great grandchildren it will take a few hundred million dollars which he's probably been assured will come to him if he just puts our future on the table).  And isn't it odd the repubs haven't grabbed it. 'Cause they don't want scraps, they want it all.

                My sigline reflects how I'm thinking.

                "I freed a thousand slaves, I could have freed a thousand more if only they knew they were slaves" Harriet Tubman

                by BrianParker14 on Sun Mar 31, 2013 at 12:06:43 AM PDT

                [ Parent ]

                •  Buck Up! (0+ / 0-)

                  I hear what you're saying, and it is tempting to let pessimism take over. They are systematically buying up the media.

                  But I believe we have the advantage in the long run because we are building a national community. The process might be hard and messy. We can't even agree to the cap. But that hard process also makes the result solid.

                  I believe in the end we will triumph because of what I call "Al Gore's Revenge". That's the social Internet, which allows us to form national communities, like Daily Kos.

                  IMO the national community elected Barack Obama President, and re-elected him. It decided and then no amount of money from the right-wing could change that decision. And it did that based on his ideas and theirs.

                  Our hope is in building community. One-way communication doesn't work in the social Internet. Only discussions like this one work, where one person works one-on-one with another to convince them. This process favors truth and it favors good ideas.

                  Imagine the Koch's trying to get their ideas across in a forum like this, where their ideas are open to countervailing facts and intelligent critique. It doesn't matter how many dollars they have in their pockets. The ideas matter.

                  It's important for us to build the community and to discuss our ideas here. Once the community has decided, no amount of money matters. That's the future, and I'm bullish on at least that part of it.

            •  Try 1911-1960's? (0+ / 0-)

              ...... Social Security blogathon March 25th thru March 29th. #HandsOffmySS FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

              by Roger Fox on Mon Apr 01, 2013 at 11:17:51 AM PDT

              [ Parent ]

        •  I agree get rid of the caps, but don't say the (2+ / 0-)

          rich cannot get social security.   Just make the maximum check you can get to be at 10 times the poverty level.

      •  Hire 23 million watch Boomers retire (0+ / 0-)

        Tha'll shrink the labor market big time. Raise Min wage, consistantly

        ...... Social Security blogathon March 25th thru March 29th. #HandsOffmySS FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

        by Roger Fox on Mon Apr 01, 2013 at 11:29:16 AM PDT

        [ Parent ]

  •  Very nice clear exposition of the big picture. (1+ / 0-)
    Recommended by:
    Liberal Thinking

    Thanks for the diary.

    Some DKos series & groups worth your while: Black Kos, Native American Netroots, KosAbility, Monday Night Cancer Club. If you'd like to join the Motor City Kossacks, send me a Kosmail.

    by peregrine kate on Fri Mar 29, 2013 at 08:16:12 PM PDT

  •  Why are the Democrats even thinking about cutting (6+ / 0-)

    social security? The Republicans have handed us a gift on this issue, and we're prepared to hand it right back.

    Both the policy and politics make no sense.

    •  $$$$$$ (4+ / 0-)
      Recommended by:
      Jim P, This old man, jm214, JerryNA

      I hate to say it, but I think too many Democrats have taken dollars from Wall Street. Now, they have to pay back somehow, and they're doing it with our money.

      Sad, blameworthy, and predictable.

      (Those six $ signs, BTW, are for $6 billion in profits, minimum.)

      •  Stop this silly shit. You are saying (0+ / 0-)

        that Democrats should be as rock solid stubborn as the Republicans saying not a cent of tax revenue, absolutely none.

        Do you realize that the current COLA is a very uncertain thing. For 2010 and 2011 it was 0. that's right. $ = 0; %  = 0

        I'm asking you to believe. Not in my ability to bring about real change in Washington ... *I'm asking you to believe in yours.* Barack Obama

        by samddobermann on Sun Mar 31, 2013 at 03:41:17 AM PDT

        [ Parent ]

  •  Driving down unemployment is the answer (4+ / 0-)
    Recommended by:
    nio, Jim P, Liberal Thinking, JerryNA

    to strengthening SS. Wage stagnation in the face of phenomenal US worker productivity is a separate but also important issue.

    I'm also fine with upping the cap. That is the logical penalty for income inequality in the US. It also keeps the cap proportional to total wage income.

    •  Income Inequality Comes From Globalization (4+ / 0-)
      Recommended by:
      Icicle68, bepanda, Bmeis, tardis10

      I think the income disparity comes almost entirely from unrestricted globalization. As an investor you can make a killing by going to China, but as a worker you can't get another nickel from working there. We've made the U.S. worker compete with workers from all over the world, 99% of whom work for less.

      That's why wages are down and unemployment rates are up.

      We have to address trade to get unemployment levels down and put a floor under wages. Changing the cap on Social Security is kind of playing around the edges.

      I know the idea of lifting the cap is popular here, but I don't want a bunch of rich people funding the program. Then they get the talking point that they're paying for it all so it should be run to their liking, which would be to privatize the whole thing.

      This is a golden opportunity for us to attack on the employment front and the wage front. Let's not waste that opportunity.

      •  That's why I posited raising the cap as a penalty (1+ / 0-)
        Recommended by:
        Liberal Thinking

        If the powers that be insist upon policies that promote income inequality then the cap has to go up. It's not the fix, to be sure, but it is the logical stopgap measure. I agree that the fix is addressing trade. Meanwhile, the left has to control the message. Part of that message is the negative consequences of income inequality. Raising the cap is just one of many.

        •  You're on to Something, There (1+ / 0-)
          Recommended by:
          samddobermann

          I proposed that we make the top income tax rate flexible and let it float depending on the unemployment rate. It should be something like 45% plus the unemployment rate.

          I call it "pay for performance". If the rich can get the unemployment rate down, they get a tax cut. They keep saying how money we give them will trickle on us. Okay, let's test that theory.

  •  Brilliant. Thank you thank you thank you (2+ / 0-)
    Recommended by:
    Liberal Thinking, The grouch

    for laying it, not only well, but completely.


    If Republicans said every 3rd person named "Smith" should hang, we'd bargain them to every 7th. Then we'll see apologia written praising this most pragmatic compromise. There's our losing formula.

    by Jim P on Fri Mar 29, 2013 at 10:16:36 PM PDT

  •  I really liked this diary. (2+ / 0-)

     I wish someone would do one like this on FDIC, which from all I can gather IS bankrupt and has been since 2008.    

    •  Tell More (2+ / 0-)
      Recommended by:
      radical simplicity, This old man

      I'm writing a book on events in the Republican presidential 2012 primaries. I've been researching Fannie and Freddie and so on. Should I look at FDIC, too? What do you think is the basic problem there?

      •  Everyone should be alarmed about how much (2+ / 0-)
        Recommended by:
        Liberal Thinking, JerryNA

        financial institutions have transferred the risk of their operations to the tax payer.  I believe some elements of Fanny and Freddie fall into this category.  
        This is what little I know about FDIC.  FDIC was part of the Glass-Steagall Act passed in 1933.  FDIC is funded by assessments on the member banks.  
        FDIC was the part of Glass-Steagall that DID NOT GET REPEALED in 1999.  
        When the fall out of bank failures from the Great Depression slowed to a trickle in the early 40’s, that is one or two a year, the fund built up a surplus.  It made sense to cut the amount of assessment the banks were required to pay into the fund, so that’s what Congress did.  Then they repealed Glass-Steagall in 1999 and banks started to fail. (AGAIN!)  – a trickle in 2001 and  hundreds in 2007.   The FDIC fund of course went bust during this period, exactly when I don’t know, and the tax payer began to pick up the cost.  At the moment I’m not sure how many billions the fund (member banks) owe the tax payer but it’s in the double digits, in the 80's I think.  Was the assessment substantially increased when banks started to fail again?  Who knows.?  How much are we (tax payers) on the hook for at this moment in time

        •  Thanks (2+ / 0-)
          Recommended by:
          This old man, samddobermann

          I think part of your answer is in Dodd-Frank. And, of course, the Republicans want to repeal that (and SOX, if you can imagine).

          I believe as part of that they made the guarantee of up to $250,000 per institution permanent. Dodd-Frank has helped to stabilize the financial system, but the Republicans are still fighting it. The filibuster over appointing someone to head up the Consumer Protection Agency is just a part of it, as is their insistence that it not get funded.

          The funny thing is that D-F and SOX primarily protect the investor. What is the main constituency of the Republican Party if it isn't investors?

          Apparently, it's Wall Street.

          I'll look more closely at FDIC in my research. Thanks!

  •  excellent (2+ / 0-)
    Recommended by:
    Liberal Thinking, The grouch

    clear concise and totally understandable.
    We need this info out everywhere.

  •  Tariffs would do the trick (1+ / 0-)
    Recommended by:
    Liberal Thinking

    They would raise prices a little, but raise pay and employment by a larger margin.

    Other countries would threaten retaliation, which would be fine.  They would be hurt by being denied access to our markets more than we would be hurt by access to our market.

    For example:  US companies build the IPhone and computers and software, we just build them overseas.  If it became more profitable to build them here then they would relocate them here.  I would bet that the threat of losing access to US electronic devices and software would convince other countries to not get into a trade war with us.

    Republican tax policies have led to financial conditions which have caused Republicans to demand cuts to programs they have always opposed.

    by AppleP on Sat Mar 30, 2013 at 04:34:08 AM PDT

    •  Precisely (0+ / 0-)

      In his excellent book Free Trade Doesn't Work Ian Fletcher points out that decades of free trade haven't increased jobs in the industries here that export. He suggests higher tariffs (30% uniform tariffs).

      I don't think I would go that high, but I think we need to supplement that with an international minimum wage. The combination of the two (and they should be phased in over time) would bring production back to the U.S. We consume something like 40% of the world's output. Companies would move production to the U.S. to address that market.

      I'd like to see 10% uniform tariffs (for all countries, not just the U.S., to promote local production) and an IMW stating around $2.50/hour and rising steadily until it is equal to our domestic minimum wage. (I'm thinking of phasing in the higher tariffs over a ten-year period and increasing the IMW in real terms by about 2-3% per years until it reaches parity).

      Cheap foreign labor is the chief cause of job loss. It has resulted in a steady decline of manufacturing in the U.S. Over the last thirty-plus years we've lost over a quarter of our manufacturing jobs--and that doesn't even take into account population growth. Along with that is the steady decline in average wages.

      Manufacturing jobs are wealth-producing jobs. This is where wealth comes from. It comes from creating a product that is more useful than the resources that went into it. When you move wealth-producing jobs overseas you impoverish the country. It should be our top priority to get them back.

      So, our trade situation is intimately bound up in the jobs and wages situation. It's the primary thing, IMO, we need to address in order to get jobs and wages up.

      Thanks for your comment. Right on!

  •  Allowing more immigration would help soc sec. (1+ / 0-)
    Recommended by:
    Liberal Thinking

    The aging baby boomers will have more people getting benefits and relatively fewer paying in. Allowing more immigrants would mean that more people would be paying in.

    •  There's a Big Trade Off (1+ / 0-)
      Recommended by:
      samddobermann

      I'm not a fan of more immigration because our country is already over-populated. The population burden here is an enormous drain on our environment. We are effectively out of fresh water sources in most of the country. It also has a bad effect on wages.

      I'm not insensitive to those that want to immigrate here. I just think we should help them at home. What would have happened, for example, if we'd spent $2 trillion in Mexico and points south building infrastructure and generally helping the local economy to improve in a sustainable way? (Instead of spending that money waging war in the Middle East and Afghanistan.) Imagine how much more "secure" we would be--not to mention how much more secure the people south of the U.S. would be, too.

      And, by the way, why should someone have to leave their home and family, travel hundreds or thousands of miles away, and live in a foreign country just to get a decent job? If they love to travel and crave the excitement of going to another culture to live and work, okay. But right now the economics forces this burden on millions of people who would probably prefer to just live where they grew up.

      We have other options. I'm not worried about having more people pay into Social Security. If we increase wages and total work hours then Social Security will be fine. It's just getting short-changed because we've had a national policy for forty years to keep wages down and ship wealth-producing jobs overseas. Reversing that fixes a whole lot of problems. I'd like to focus on that.

      •  Fact- more immigration would help soc sec (2+ / 0-)

        You asked people to put their plans in the comments.

        Think liberally.

        Immigration is also not necessarily bad for the environment. Our individual  carbon footprint is not preordained or based solely on where we live.  Also, not everyone who wants to come to America is poor. Some have air conditioners, cars, and fly in airplanes.

         

        •  Well... (0+ / 0-)

          I didn't say I'd agree with them!

          As long as it doesn't add to population, I'm fine with it. But I'm frankly quite worried that we are already living well beyond our means, in terms of the environment.

          Ultimately, I'm a believer in the system. I think we all need to put in our comments and our ideas. I believe I am right on things, but I know everyone else believes that, too. So, I allow for the possibility I don't have the right answer (despite what I might feel) and they do.

          I welcome your ideas on this. Every idea I've seen here has been vastly superior to what we're getting from the other side.

          And, the system only works if there are relatively free inputs and everyone participates. So far, there's been entirely too much screaming from our opponents, and not enough from us. So, please, don't mind me. If you believe it, scream it. That's the American way!

  •  tell President Obama this (1+ / 0-)
    Recommended by:
    Liberal Thinking

    Right now it's not the Republicans we have to fear; it's the President.  He's the one that wants to cut social security.

    "The real wealth of a nation consists of the contributions of its people and nature." -- Rianne Eisler

    by noofsh on Sat Mar 30, 2013 at 06:38:25 AM PDT

    •  I Know (1+ / 0-)
      Recommended by:
      JerryNA

      It's no surprise to me. He was primarily funded by Wall Street before he became nationally popular. He clearly doesn't understand economics, and he seems to think we win by compromising with the clueless and the vile.

      I say this as someone who voted for him twice and think he has flashes of brilliance. He's done a lot to help us and help the world. His administration negotiated strategic arms reduction. He's moved now to get Israel to be a bit more rational about its relationship with the Palestinians, and maybe that will ultimately result in peace. He ratcheted down our belligerent stance with the rest of the world.

      But in terms of economics and Constitutional law, he is completely tone-deaf. PPACA, for all its benefits, is an economic disaster. You can't push 30 million people in to for-profit health insurance without ballooning the healthcare sector. He's continued the Bush dictatorship (drones, spying, indefinite detention--the works), and enhanced it. These are not signs he knows what he's doing.

      He isn't going to be up for re-election, so I think we should ignore him and work on Congress. We need to make it clear to our people there that we will not tolerate cuts to Social Security. If they want to continue to be our representatives they need to represent us. Otherwise, there are plenty of good, qualified people around.

      •  You are so wrong on PPACA (1+ / 0-)
        Recommended by:
        Liberal Thinking

        It isn't for profit health INSURANCE that is the problem. It's the for profit health SECTOR of providers. From doctors, hospitals and Pharma to the lowest level pieces of equipment; everyone's out to make a profit and too many don't care about how they make it. They self justify excess treatments but if any attempt is made to limit or eliminate the ones that either give no benefit or even cause great harm people scream "rationing!"

        If the problem was just the insurers then why is Medicare such a high cost disaster? It, and Medicaid are what are the real budget busters.

        The PPACA has a lot of provisions to reduce the costs of the actual health care. And more that improve QUALITY which are sorely needed.

        Maybe you could work on Congress and while you are at it get them to remove the restrictions on moving the Guantanamo prisoners out and get them tried. Also I prefer drone strikes to dropping 500 pound bombs to get one holed up bad guy — specially when so many were misses. You are off base about some other things which is surprising because you make a lot of sense about social security (except that changing COLA which is not the end of the world. It can always be changed back or SS can be increased some other way).

        I'm asking you to believe. Not in my ability to bring about real change in Washington ... *I'm asking you to believe in yours.* Barack Obama

        by samddobermann on Sun Mar 31, 2013 at 04:11:48 AM PDT

        [ Parent ]

        •  Let Met Put It to You This Way (0+ / 0-)

          I agree with your main point. Yes, for-profit healthcare in general tends to push up costs. I'm just not as hot under the collar about that because I think people with medical skills deserve to be well compensated, whereas I don't think the for-profit health insurance sector should even exist. They make their profits from the death and suffering of the insured. That's just a little different from a doctor being well-paid for doing work that saves lives.

          As for PPACA, there are a lot of good points to it. But, fundamentally, the cost structure for for-profit health insurance is too high. Even with the best medical loss ratio, we are still going to see 15% go to unnecessary expenses. In a public system, this overhead is between 3 and 4%. That's an 11 point difference, at a minimum.

          Healthcare became an issue when the healthcare sector took more than 15% of GDP. It's over 17% now and still climbing. A few years ago, during the big debate, I did a calculation on what it would take to move everyone into the healthcare system and still get costs down to 15%. That would take cuts of about $650 billion a year.

          There isn't any way to get universal, affordable healthcare and maintain the for-profit health insurance sector. You need to move everyone into one universal public system. PPACA, in that sense, was a step backward.

          The average cost of adding a person to for-profit health insurance is between $8,000 and $10,000 per person. That means that adding 30 million people in this way would expand the healthcare sector by about $300 billion, which is around 2% of GDP. This does not contribute to cutting total costs.

          So, I stand by my statement, "PPACA is an economic disaster."

          Moving to a universal, publicly funded system would help rein in costs by eliminating hundreds of billions in profits, excessive executive pay, and administrative costs. So, just to get started I think that's where we need to go. Once you have that, I think you can wring some of the other unnecessary costs out of the system at the provider level.

          As for Medicare having such high costs, I just don't have any real information on that. I suspect it comes from the overall soaring costs of healthcare, and moving to a universal system would help there because we could, essentially, say that the country will set a limit of 15% of GDP and then the question is what tradeoffs you make within that to provide care. It would also help, of course, if we followed the lead of the smart countries and negotiated drug prices as a block instead of letting each poor schmo go out and do it on their own.

          Now, as for moving the prisoners out of Guantanamo and getting them tried, I refer you to Prosecuting Officials for Crimes. This is very much on my agenda. In fact, I'm intent on rolling back the Bush dictatorship and restoring democracy. I'd appreciate your help!

          As for drones, I don't think we should stop using them, I just think Congress needs to put a border on it. There are lawless areas of the world where we can't count on a sovereign government to apprehend people we accuse of plotting against us and extraditing them or imprisoning them. Taking military action there is different from giving the President carte blanche to kill people with drones wherever he feels like it. And, it should be done by the military, not the CIA. (I nominate the Marines to take over this capability, for reasons I've stated elsewhere.)

          I don't expect to get agreement on everything. I have my views and I argue for them. I noticed that everyone else does that, too. And, BTW, my facts and analysis are different because I'm researching those facts directly from original sources, where I can, and I don't just depend on anyone else's say-so for opinions. If I get it wrong, then I'm solely responsible for that, but I'm also not just repeating wrong ideas that someone else came up with. I think we need to trust that the system will ultimately make the right decisions, but it will only do that if we have free discussions and EVERYONE participates. I'm holding up my end.

          Rather a long response, but I thought you deserved a full explanation.

  •  May I add to this.... ??? (1+ / 0-)
    Recommended by:
    Liberal Thinking

    The real reason the Republicans want to Privatize SS is because....

    OF THE GREAT MASS RETIREMENT OF THE BABY BOOMERS !!!

    And those baby boomers will be withdrawing about $5 Trillion out of Wall Street from the IRA's, 401k's and other pension plans.

    Republicans (i.e. Wall Street) wants those funds replaced and the best way for them to replenish those lost monies is through SS Privatization.

    That is the real deal behind why they want to destroy SS as it is - because they want the money.

    -6.13 -4.4 Where are you? Take the Test!!!

    by MarciaJ720 on Sat Mar 30, 2013 at 07:54:16 AM PDT

    •  Yes (1+ / 0-)
      Recommended by:
      MarciaJ720

      They point to the baby boomers and go, "Goo, goo, goo!" But the truth is that Reagan and Congress fixed this in the 1980s. That's why we pay 12.4% for OASI tax, instead of 10.8%.

      During the early part of Reagan's administration, the Greenspan Commission (NCSSR) recommended changes to Social Security to address the needs of the baby boomers. This was enacted in 1983. It pushed the retirement age back, increased the rates, established the "trust fund", and made some of the benefits taxable. This was all done to make sure the baby boomers would have adequate funds. In effect, it makes us work longer and harder to retire. Yeah, Reagan.

      As a result, we have about a two-trillion-dollar surplus in the Social Security fund. Politicians want to raid it because they don't want to actually pay this money that we owe to retirees.

      Too bad.

      Yeah, they don't want to pay it, but the real reason, I think (and wrote) is because they see an enormous opportunity for profits.

      Either way, it's about the money. They want to piratize it, as someone once put it. We worked for those benefits and they belong to us. Don't let them banditize it.

      References:

      http://en.wikipedia.org/...

      http://www.ssa.gov/...

      http://www.taxpolicycenter.org/...

  •  I like the idea of tarrifs, but this is only a (1+ / 0-)
    Recommended by:
    Liberal Thinking

    couple of decades problem.  Once large numbers of baby boomers start to die then less money goes out of social security.  So maybe don't take off the caps, but raise the cap to $500,000 and in a few decades lower it again.

    •  Baby Boomers Are Not the Problem (1+ / 0-)
      Recommended by:
      MarciaJ720

      As I noted here the needs of the baby boomers have already been addressed. We have been paying a higher rate, our retirement was already delayed, and they made our benefits taxable. This was all done at the behest of Alan Greenspan in the 1980s.

      Raising the cap to a half million is sensible, since you basically need a million-dollar income these days to be truly secure. I have to consider people making $500K a year to be working-class.

      But the fundamental problem, as I wrote, is that workers are simply not being paid what they used to be. We've had a four-decade policy of holding down wages. It's succeeded to the point it's affecting Social Security funding. We need to reverse that policy, not just to rescue Social Security from its "rescuers" but to get the economy back in order more generally.

  •  Response part 1 (2+ / 0-)
    Recommended by:
    MarciaJ720, Liberal Thinking
    Most of it would be profits. That's because Wall Street already has a large platoon of mutual funds they could feed those billions. Actual billions, because in some countries where they've privatized Social Security the administrative costs average 3%, not 0.6% (like the Social Security Administration) or even 1%. Do the math. How much is 3% of $650 billion a year?

    And that's not counting loads. Loads are the sales commissions you pay to have them take your money. A typical load is 5%. That means they want to scoop up 5% of your retirement before even handling your money. What's 5% of $650 billion a year?

    A lot of mutual funds  don't have loads any more. Most of the good ones don't. Most good index funds have expense ratios of around 0.25 percent or less. Now this isn't an argument for SS privatization, since I don't believe that will work for other reasons.

    But there's a lot of people who have retirement savings in 401ks/IRA's/and taxable accounts as a supplement to Social Security and I don't want them to get the impression that loads are something they should expect based on your comment.

    Throughout my entire public career I have followed the personal philosophy that I am a free man, an American, a public servant, and a member of my party, in that order always and only." -- LBJ

    by moderatemajority on Sat Mar 30, 2013 at 12:49:15 PM PDT

    •  That's Right (1+ / 0-)
      Recommended by:
      moderatemajority

      The costs vary and there are no-load funds. However, when I go to find them for my IRAs and 401(k) I'm finding that the typical costs are from 0.5% to about 1.75%. It is also hard to find one I want that doesn't have a load (and I'd be short-changing my broker if I made him do all the work for nothing).

      Even without loads, the costs are going to be higher than our current Social Security costs. They want this because they want to make a profit. That profit has to come from somewhere. They aren't going to set up and run funds out of the goodness of their hearts. First of all, they'd have to locate those hearts....

      Second, in other countries they have either prevented participants from switching funds or that switching has resulted in higher management fees. So, our current experience with fees isn't a guarantee of future performance.

      •  IRA's and 401k's (1+ / 0-)
        Recommended by:
        Liberal Thinking

        are completely different beasts. 401k's are determined by the employer and vary widely in nature from the good, the bad, and the ugly.

        IRA'S are individually managed on the other hand and you have the choice to put that where ever you want. The best mutual funds and etf's have the lowest costs of around 0.10-0.25 see here.

        http://research.tdameritrade.com/...

        http://research.tdameritrade.com/...

        and

        http://research.tdameritrade.com/...

        These three funds would allow an investor to have equity investments in the entire world with fixed income for about 0.12 percent.

        As I said before, this isn't an argument for SS privatization, since I don't believe that will work for other reason but nonetheless.

        Throughout my entire public career I have followed the personal philosophy that I am a free man, an American, a public servant, and a member of my party, in that order always and only." -- LBJ

        by moderatemajority on Sat Mar 30, 2013 at 08:49:09 PM PDT

        [ Parent ]

        •  Those Are Still Investment Funds (0+ / 0-)

          They carry risks. The only investments suitable for retirement are the very safest ones. As I say above you can't afford to reach 75 and have someone tell you you're out of money. Or, 65, for that matter and not have enough to invest in your annuity to get you through.

          But if you're only going to invest in the safest instruments, why pay anyone anything to manage it for you?

          Obviously, if you invest in the whole world the individual problems with one company or another would be averaged out. Unfortunately, if the whole world economy went down, so would your investment. A worldwide recession? Well, we just had one.

  •  Response part 2 (2+ / 0-)
    Recommended by:
    MarciaJ720, Liberal Thinking
    Funding Social Security with a payroll tax makes all employers pay at least enough for the worker to survive disability (should it occur) and retirement (when, we hope, it does).
    Employers pay the payroll tax in the legal sense, but in an economic sense it is employees that actually pay both sides of the social security tax, which is 12.4 percent. Employees pay the Social Security tax through lower wages. When the CBO calculates tax burden, it uses that assumption.

    Throughout my entire public career I have followed the personal philosophy that I am a free man, an American, a public servant, and a member of my party, in that order always and only." -- LBJ

    by moderatemajority on Sat Mar 30, 2013 at 12:51:49 PM PDT

    •  I Don't Agree With This (0+ / 0-)

      I don't think you can say that either the worker or the company pays the tax in an economic sense. Yes, the worker has to work harder to be able to cover the costs of this tax, but equally the firm can't extract as much profit for its investment. I think, in economic terms, it comes from both.

      As for lower wages, the employee must get enough money out of their take home pay to survive. There is a point (at the bottom of the wage scale) where they can't take less because they can't survive. At that point it all comes from profits.

      If you take away this tax then the company is only obligated to pay enough for the worker to survive while they are working. The minimum wage would cover this, except it isn't high enough to cover the lifetime living wages of most workers. In smaller cities it's around $15/hour and goes up to around $28/hour in the most expensive (San Francisco). The majority of workers in the U.S. don't have disposable income to put into retirement savings, and without the OASI tax they wouldn't save at all.

      I'm talking about groups and the general economics of this, so YMMV. But I think I'm on very solid ground to claim that Social Security (and Medicare) are part of the minimum wage system in this country.

      •  At that point (0+ / 0-)

        we're talking about such a small portion of the population to become irrelevant.

        Only 4 percent of workers earn the minimum wage. Also, one of the myths about the minimum wage which discredits the living wage movement is that many of the people working at or near minimum wage are not breadwinners, but teenagers and college students working part-time.

        In 2010, according to the Bureau of Labor Statistics, 4.4 million American workers were paid at the federal minimum wage or lower (some jobs are exempt). More than half of those workers are younger than 25, which means they’re likely teenagers and college students with part-time and summer jobs during school. Minimum-wage earners are a relative small slice of the American economy: of all workers who are paid by the hour, only 4 percent make minimum wage or less.
        http://www.thedailybeast.com/...

        Again, everyone from the left-leaning CBPP to the nonpartisan CBO , to the right-leaning Tax Foundation says that payroll taxes are paid economically from the employee.

        Throughout my entire public career I have followed the personal philosophy that I am a free man, an American, a public servant, and a member of my party, in that order always and only." -- LBJ

        by moderatemajority on Sun Mar 31, 2013 at 12:21:26 PM PDT

        [ Parent ]

  •  Response part 3 (2+ / 0-)
    Recommended by:
    MarciaJ720, Liberal Thinking
    And unemployment is also almost 1% higher now than it was before 1980. One percent of the work force means about 1 million people not working. Even at minimum wage that represents about 2 billion hours of work and about $14 billion of lost wages—$1.4 billion that’s not funding Social Security. “A billion here, a billion there…”.
    Social Security's actuarial projections already impute what they think are reasonable assumptions for employment,income,and GDP growth based on current and historical trends.

    Throughout my entire public career I have followed the personal philosophy that I am a free man, an American, a public servant, and a member of my party, in that order always and only." -- LBJ

    by moderatemajority on Sat Mar 30, 2013 at 12:54:18 PM PDT

    •  I'm Sure They Do (0+ / 0-)

      That's why we need to change those trends. Otherwise, we're screwed.

      Our employment levels have been depressed since we started shipping wealth-producing jobs overseas. The actual average unemployment rate in the U.S. is 0.9% higher in the 30 years following 1978 (when manufacturing peaked) as opposed to the 30 years prior. (This is based on BLS unemployment numbers.) This isn't because of recessions or people living on the dole. It's because we made our workers compete with cheap labor from all over the world.

      This is a reversible trend. All it takes is sensible trade policy. So, the greater unemployment is not an inevitable part of the future. We can change that, and we should, if for no other reason than it robs the Social Security fund of billions of dollars a year.

      •  Manufacturing did not peak in 1978 (0+ / 0-)

        The manufacturing output in this country has been on a constant upward phase calculated by GDP and value added. What you mean to say is that manufacturing employment has gone down because we use more robots and technological goods to create manufacturing products.

        And again, I reject the idea of blaming trade policy. Trade policy is a net benefit for all countries involved. "Everyone has a comparative advantage" You can see Krugman for the backup information if you don't believe me. The US has constantly been on the bath of trade liberalization since the 1940's.

        Throughout my entire public career I have followed the personal philosophy that I am a free man, an American, a public servant, and a member of my party, in that order always and only." -- LBJ

        by moderatemajority on Sun Mar 31, 2013 at 12:24:58 PM PDT

        [ Parent ]

        •  We'll Have to Disagree on That (0+ / 0-)

          Regardless of whether you say manufacturing has continued to climb, the effect on jobs is the same. The reason we've seen a decline in wages (and employment levels) is still because of trade policy. We've shipped wealth-producing jobs overseas. It is no coincidence that wages and employment rates have fallen as we've done this.

          Trade policy (if you mean free trade) is not always a net benefit for the countries involved. It depends entirely on what's traded. So far, our trade policy has caused enormous structural damage to the economy. This is why we have a federal deficit to begin with. You can't ship hundreds of billions of dollars a year out of the country, year after year, without causing damage.

          When trade is beneficial to all countries involved it is in balance. I don't remember our last trade surplus. Last year our trade deficit was on the order of $50 billion. That's $50 billion that resulted in absolutely no funding for Social Security. If that production had occurred here it would have resulted in about $25 billion in worker incomes, meaning about $2.5 billion to the Social Security fund.

          And then there's the question of who it benefits. It's benefited investors, but it has not benefited workers. Workers were seeing steady increases in their compensation in proportion to the increase in productivity right up through the 1970s. Once we turned to free trade wages leveled off and wages for the typical worker declined, while productivity continued to climb. This is why you see increased income disparity and sizable changes in wealth distribution. (Much of that disparity in wealth would have occurred with globalization, anyway, because of scale, but not at the expense of worker incomes. That part came about because we allowed in cheap imports.)

          A trade policy that's constantly shortchanging our retirement system (not to mention Medicare, state governments, and the rest) is not helpful to the U.S. economy. Moving production back here would increase wealth in the U.S. A better trade policy would be one that encourages that.

  •  What an excellent way to explain it! (1+ / 0-)
    Recommended by:
    Liberal Thinking
    Until we developed Social Security employers could externalize a part of the cost of this labor to society—to families, friends, charity or the government. They only needed to pay employees enough to live while they worked. As soon as the worker developed a debilitating disease or got too old to work, the employer could simply stop paying them. Since most work is done for the cheapest price the company can get away with (workers cannot afford to turn down work, so there are always workers willing to take any job, even if it doesn't pay enough to live beyond work) this means the company could get labor below the actual lifetime living wage for that worker.

    Funding Social Security with a payroll tax makes all employers pay at least enough for the worker to survive disability (should it occur) and retirement (when, we hope, it does).

    Thank you!
  •  And Social Security is better than a pension (2+ / 0-)
    Recommended by:
    Bruce Webb, Liberal Thinking

    from a private company because the people running the private pension can mess around with the numbers.

    If a private pension has more money than it needs to cover the pension obligations, it's overfunded. If a private pension has less money than it needs, it's underfunded. So what happens? An overfunded pension tempts the company to raid the pension (hey, we've got extra money! let's spend it!). An underfunded pension tempts the company to declare bankruptcy or to reduce pension payments or to do some fancy accounting to spin off the pension obligations to a separate company.

    And this happens no matter who's in charge (could be a company-run pension plan, a union-run pension plan, or a state government pension plan).

    "Stupid just can't keep its mouth shut." -- SweetAuntFanny's grandmother.

    by Dbug on Sat Mar 30, 2013 at 06:21:25 PM PDT

  •  The Poll (0+ / 0-)

    Thank you to those who've taken the poll. At this (late) point it has over 80 votes, and more than half of the people voting checked off either increasing wages or increasing employment levels. (I suspect that most of those people would like the other option, as well.) IMO, every discussion about changing Social Security should end with a discussion of how much income workers have lost over the last few decades (and how to get that money back).

    I appreciate your taking the time to vote, and I hope the blogathon informed, entertained, and excited you!

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site